Rupee recovers after breaching 56-level

Rupee recovers after breaching 56-level

Tracking stock market movements, the rupee on Friday breached 56-level against dollar but recouped early losses to close at 55.75 on fag-end selling of US currency by banks and exporters.

The rupee opened sharply lower at 56.15 per dollar as against the last closing level of 55.84 per dollar at the Interbank Foreign Exchange (Forex) Market. Global markets tanked after ECB on Thursday did not announce much-awaited steps to tackle Eurozone debt crisis.

As the local stock market wilted under selling pressure, the pressure on rupee increased and it touched 56.19 amid strong demand of dollar from banks. However, rupee recovered at the fag-end of the day to 55.72 before ending at 55.75, showing a gain of 9 paise over yesterday's closing level.

The euro rebounded as the short-end of the Spanish and Italian government bond markets rallied while dollar weakened ahead of sensitive US nonfarm-payrolls data, traders said.

"Initial rupee depreciation was largely due to no action from the ECB side. So, rupee weakened in sync with the euro weakening against dollar. However, in afternoon as European stocks rebounded, Indian shares took cue pushing up rupee," Hemal Doshi, Currency Strategist, Geojit Comtrade said.

The late strength in rupee was also on account of some custodial flow of dollars from foreign banks, said N S Venkatesh, Head of Treasury, IDBI Bank, adding there was no sign of RBI intervention.

Provisional data shows FIIs pumped in Rs 208 crore in stocks. The Indian benchmark Sensex declined by 26 points to end at 17,197.93 after dropping nearly 200 points intra-day.

Abhishek Goenka, CEO, India Forex Advisors said, the market is expected to remain volatile as every positive or negative news in the domestic and international market would impact the rupee.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The rupee shaved off the gap up weakness tracking global markets cues where the risk off trades got converted into risk on after the strain on Spanish and Italian bonds cooled off following the ECB's assurance to start the bond buying program for short dated bonds".

The Indian Met Department's warning of a drought-like situation looming was also ignored by the market which gained on increased risk on trades in global markets, he added.

The premium for the forward dollar closed higher on fresh paying pressure from banks and corporates.

The benchmark six-month forward dollar premium payable in January settled higher at 182-1/2-184-1/2 paise from previous close of 181-183 paise.

The premium for far-forward contracts maturing in July also finished up at 329-1/2-331 paise from 326-1/2-328-1/2 paise.

The RBI fixed the reference rate for the US dollar at 56.0845 and for euro at 68.3605.

The rupee recovered against the pound sterling to end at 86.82 from Thursday's close of 86.89 and moved up against the euro to 68.42 from 68.47 previously.

It also firmed up against the Japanese yen to 71.23 per 100 yen from last close of 71.40.